Ninth Circuit Affirms ERISA’s Preemption of State-Law Claims

A health plan participant brought state-law claims against the plan’s insurer, alleging the insurer engaged in deceptive practices, breached its contract, and committed fraud in handling his claim. After a federal trial court dismissed the case based on ERISA’s preemption of state-law claims, the participant appealed. In a very brief ruling, the Ninth Circuit affirmed the dismissal.

The court described express preemption and conflict preemption as the two strands of ERISA preemption. The express strand generally preempts state laws that relate to ERISA plans, but state laws regulating insurance are saved from preemption. Conflict preemption applies “when a state law’s enforcement mechanism conflicts with ERISA’s comprehensive scheme of civil remedies.” The court concluded that, because remedies potentially available under the state law could exceed those available under ERISA, the state law conflicted with ERISA’s enforcement scheme and was preempted. (Although the participant had initially asserted that there was a factual dispute about whether the plan was subject to ERISA, the court determined that there was no real dispute and the plan was an ERISA plan.) The participant argued that his claims did not fall under ERISA’s civil enforcement scheme because they were based on a misrepresentation by an insurance company employee. According to the court, while misrepresentation claims related to violations independent of ERISA obligations might not be preempted, ERISA provides the exclusive vehicle for participants to pursue actions involving disputed benefit claims. In addition, the court rejected the participant’s argument that the state law regulated insurance and thus was saved from preemption, explaining that because the lawsuit was preempted under the conflict strand, the exceptions to express preemption were inapplicable.

EBIA Comment: This lawsuit arose, as so many do, after the participant incurred a large medical bill and the health plan paid less than anticipated. This case demonstrates the breadth of ERISA’s preemptive reach, particularly under conflict preemption. In general, ERISA’s civil enforcement scheme is intended to be the exclusive vehicle for seeking redress under ERISA-governed plans, occupying the field to such an extent that state-law causes of action or state-law remedies are completely preempted. As a result, this type of preemption is sometimes referred to as “field” or “complete” preemption. For more information, see EBIA’s ERISA Compliance manual at Section XXXIX (“ERISA Preemption of State Laws”). See also EBIA’s Self-Insured Health Plans manual at Section V.E (“ERISA Preemption and the Application of State Mandates”).

Contributing Editors: EBIA Staff.